Minnesota Utility Proposes Biogas Pilot Program

Centerpoint Energy of Minnesota asked the Minnesota Public Utility Commission to allow a pilot program in which its customers could purchase renewable natural gas as fuel for home heating and cooking.

CenterPoint Energy of Minnesota (CenterPoint) filed a request with the Minnesota Public Utility Commission for a new pilot program in which its natural gas customers could purchase renewable natural gas, also known as biogas, as fuel for home heating and cooking.

If approved, the pilot program CenterPoint requested on August 23 could begin as early as the spring of 2019 and would make the utility one of the first in the country to offer its customers the option of purchasing renewable natural gas for a higher rate, or “green tariff,” than traditional natural gas.

Renewable natural gas (RNG) is made from methane produced from organic waste, such as corn stalks, garbage from landfills, manure, and other such materials decomposed in machines called digesters. The methane is then processed into gas that can be used for fueling car engines, producing electricity, and generating heat.

Instead of producing biogas itself, CenterPoint would purchase the fuel in bulk from various biogas plants around the country and process it, stripping it of various contaminants before it is used by the utility’s customers. CenterPoint would contract to purchase enough biogas to meet the demand specified in its customers’ contracts. The costs of treating and shipping the biogas mean consumers would pay more for it.

Requesting Higher-Cost Fuel?

Although the program would help the utility meet Minnesota’s renewable energy mandate, the company’s decision to incorporate RNG into its energy mix was not driven by that mandate but is in response to customer demand, particularly requests from Millennials, says Rebecca Virden, manager of public relations for CenterPoint in Minnesota.

“We’ve been listening to our customers,” said Virden. “Our younger generation certainly [expresses] concern for and want us to take responsibility for our energy future.

“We’ve been doing polling, and in a poll of just over 1,500 CenterPoint customers, around half of them responded by saying they wouldn’t mind paying $5 to $25 more per month for renewable natural gas,” Virden said.

Everyone Would Pay More

CenterPoint estimates its cost per 100,000 British thermal units (btu) of RNG would be “slightly less than $4,” $3 more expensive than traditional natural gas. Every customer enrolling in the program will pay a minimum of $1.00 per month more than the cost of using traditional natural gas, and the upcharge could be considerably more, based on how much renewable gas the customer contracts for each month.

The price hikes will also hit customers who don’t enroll in the program. CenterPoint estimates customers not enrolled in the program will have a $0.70 annual rise in their natural gas bills, a cross-subsidy the company says is necessary to get the program started.

‘Incredibly Expensive’

Isaac Orr, a policy fellow at the Center of the American Experiment, isn’t convinced the cost of using biogas is worth it.

“The biogas produced from this project would be incredibly expensive, 627 percent more per therm [100,000 btu] than traditional gas,” Orr said. “I’m skeptical this will catch on.

“Even though I won't be enrolling in the program personally, I'll still be on the hook for some of the cost, which erodes the argument these are ‘voluntary’ fees,” Orr said.

Mitchell Rolling (marolling20@gmail.com) is a research assistant at the Center of the American Experiment.